Cyprus Property: Looking ahead after talking to the IMF

I recently had the opportunity to discuss the current state of the real estate market with the IMF consulting group which is reviewing progress in the Cyprus economy and its recovery.

I have laid down my own thoughts on the subject, summarised as follows:

· - The visa/passports scheme is a case to consider and to bear in mind that notwithstanding that other countries have similar schemes, we seem to overdo it in the promotion. It is on the one hand, not as serious as it sounds, since only 0.3% they used this system in Cyprus, as opposed to the total of 99.7% of the total EU countries. But then, Cyprus is small and the only country that has adopted the bail-in with our EU partners abandoning us. Why not to target Cyprus again for this scheme as an example for others?

· - The valuation prices (Limassol as a benchmark) of EUR 15,000/sq.m. for beach units and 10,000/sq.m. for near the beach is excessive by current standards, but it does not compare with other cities such as London, Paris, French/Italian Riviera, Monaco, etc. whereas it is higher than that of our top competitors in Spain/Portugal.

· - Sales of high-end properties are fast and developers cannot build fast enough, but there are many other developers waiting to climb on the golden band wagon and perhaps at some time Cyprus should re-examine the relaxations given.

· - The limitation of three years’ retention of ownership is not satisfactory since the existing buyers will most likely sell their properties within a short period of time thereafter. Who will absorb the EUR 2 mln/properties? Not the locals, with the examples of the Pieris Estate situation as a given.

· - The time bomb of the “sick” system of the common expenses is an issue which has been ignored by the last three governments entailing huge problems especially for the high-end newcomers who pay increasing attention to the good maintenance of buildings. Now that occupiers are not willing to pay EUR 100 p.m., how will they pay the 1,000 p.m. common expenses for those high end properties?

· - The red tape regarding the title issue is still with us. What is needed is a brand new procedure and not patching up of the existing system. I have told the IMF officials that “Cyprus is like an old car which is not working, yet we have given it a new paint job leaving the car with the same engine”.

· - Banks should take special care on the funding of these projects that target the new high end properties.

· - I have explained to the IMF that Limassol is “another country” and must not be compared with the real estate situation in Cyprus in general.

· - I also pointed out the con job in the creation regarding the value of EUR 300,000 (for visas) or 500,000 (passports) since we have now the phenomenon of having a sales of a unit say for EUR 400,000, but the applicant claiming that its value is 500,000. This will block the system and the word “value” should change to “cost”.

· - The side effects on the Greek side in the event of a political solution, the return of Varoshia to its Greek Cypriot owners, etc. were also discussed (including the return under the Turkish Cypriot administration).

· - I have discussed in addition to the tax attraction that Cyprus offers, also its very low crime rate and the attraction for families.

· - Cyprus does not attract only Chinese and Russians, but others as well from all over the world. The statistics that the Lands Office produces is basic, whereas there is a wealth of available information on which the Cyprus and business people can rely (details regarding nationalities of buyers, type of property and value bought, location by type, etc). The data is there but it is an unexplored wealth.

· - The legal system in a summary was discussed including the service of a law suit, delays in hearings and non-effective decisions.

· - The cost of living was also discussed to a small extent and I reported that food cost is going down, as is the resale accommodation, cars, electricity, etc (be it that expensive cars are on the up emanating from the foreign buyers primarily, as well as the doctors who do not issue receipts, as well as auditors and some lawyers who deal with foreigners).

For these and other matters we had an exchange of views, but I do not know what the IMF impression of all these is.